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Federal Telecommunications Act of 1996

Universal Service Fund

The “Gore Tax,” which is now being collected (upon directive of the FCC) by telephone companies, began as a 5% fee (tax) on all interstate long-distance charges, which will, as AT&T is explaining to its customers, “give schools and libraries access to advanced services like the Internet.”
The Universal Service Fund is a vehicle for maintaining universal service in the telecommunications sector. In order to support telephone service in high cost areas, this fund, which is supported by long-distance service providers, pays subsidies to local exchange carriers (LECs) in proportion to their subscriber line costs. Subsidy payments from the USF were started in 1986, and its initial eight-year plan came to an end in 1993. The Federal Telecommunications Act, passed in the Spring of 1996, called for major changes in the telecommunications industry. The act placed an emphasis on competition and deregulation, and included new rules on who could tap funds in the Universal Service Fund (USF). The act went on to include changes in how the USF could be used. The Universal Service regulations were published in the Federal Register on June 17, 1997 and took effect on July 17, 1997 – just in time for the “budget deal.”

American Enterprise fellow James K. Glassman says of the Gore Tax, “The educational benefits are more uncertain, and 80 percent of schools are already connected to the Internet anyway.” Less than 2% of telephone tax revenues are actually being designated for “connection fees.”

For the first time, the 1996 Act includes schools and libraries among the explicit beneficiaries of universal service support. The legislative history indicated that Congress intended to ensure that eligible schools and libraries have affordable access to modern telecommunications and information services that will enable them to provide educational services to all parts of the nation.

K-12 schools and libraries are eligible for discounts of 20% to 90% on telecommunications services, Internet access, and internal connections. Funds will be distributed from a single, common universal service fund that has a cap of $2.25 billion per year for the entire United States. Any unspent funds carry over for use in the next year, with slightly different carry forward rules in the first two years.

By 2006, the fee had more than doubled to 10.9%. The FCC has subsequently voted to raise the Universal Service Charge or “Gore tax” as its become known on telephone users by $1 billion and by 2006 has now grown to become a $7 billion tax. If memory serves me, Article 1, Section 8 of Constitution still says only “Congress shall have power to lay and collect taxes.” How is it that the FCC now has this authority?

In June, 2006 the FCC expanded the USF making Internet telephone calls subject to universal service fund charges for the first time, while raising by 30 percent the basic USF rate to be paid by customers with cellular service.

Rural Health Care

The FCC is encouraging the growth of telehealth in rural areas by making telecommunications rates for public and non-profit rural health care providers comparable to those paid in urban areas. The annual cap on federal universal service support for health care providers shall be $400 million per funding year. Telehealth is the use of communications technologies to provide and support health care at a distance. Examples of telehealth include the use of communications to provide patient treatment, often via still images or video, and the exchange and distribution of public health information.

Phone Number Portability

My phone bill from Southwestern Bell contained the following explanation:“The Federal Telecommunications of Act of 1996 required local telephone companies to initiate measures that permit customers to keep their local telephone numbers if they change their local telephone service provider while remaining at the same location. This capability is commonly called “number portability. The Federal Communications Commission (FCC) has ruled that the costs to provide “number portability” may be recovered through a monthly service charge.”

My first reaction when I saw this new tax was, “What other local telephone services provider?” So, I called Southwestern Bell billing department to ask them about it. I spoke with Linda who very cordially told me she could not divulge that information about their competitors. She suggested I call the local operator and ask them. So I spoke with Frank who essentially repeated what Linda had told me and suggested I look in the Yellow Pages. Letting my fingers do the walking, I found a small obscure listing for a company that provided such service. So, I called them to inquire about their services. Guess what? They buy their lines from Southwestern Bell! What a deal … get billed by another company that is going to mark up their costs from the established company (SWB) and get to charge an extra fee (or tax) to boot. (Do I hear ‘conspiracy’ anywhere?)

Okay, say I don’t care about having “number portability” and want to cancel it. I call Southwestern Bell again, this time talking with April. She was again very cordial and tried her best to explain to me the new charge (within company guidelines of “what she can and cannot say.”) Come to find out that even if I never use the “number portability” service, I still have to pay for it in order to have the privilege of calling someone else who might take advantage of the service.

When is “enough – enough?” These lying politicians in Washington tell us that they are reducing our taxes … while they slip in all these additional fees. I asked April at Southwestern Bell if she had been getting many calls inquiring about this new tax. She said they had, but most people were satisfied after being told it was just another mandated tax levied by the Federal Government.

Personally, I’m getting a little tired (no, allot tired), of the government taxing, taxing, and taxing, all the while telling us they’re reducing taxes. They are simply doing what Bill Clinton and the U.S. Senate legitimized: lying!

My most recent phone bill from Southwestern Bell contains 36% taxes and fees! Someone please tell me how this is “the right thing to do.”

Internet Tax

Perhaps you’ve seen the ad or received an email stating:

Internet Tax AlertCongress is considering long distance charges for your internet connection.
CNN has reported that the Government would be deciding at any time to allow or not allow a Charge to your phone bill equal to a Long Distance call EACH time you access the Internet.

The above alert has been labeled a “hoax” and “urban legend” by some. But, the facts can speak for themselves… the FCC, not Congress recently ruled on this exact topic and it was not “hoax.” Folks, they may not be getting additional fees (taxes) in the next several months, but you should know they have their eyes on the “deep pockets” of the Internet and will incrementally raise prices (increase taxes) disguised as some other kind of fee.

If the phone companies have their way, you WILL end up paying more for basic service. The FCC has ruled that calls to ISP’s should be considered interstate transmissions, so ISPs may have to pay fees to local phone compies for using their wires. FCC Chairman William Kennard denies that consumers will end up paying higher rates. Right now, the charges are being waived as an exception, but given the huge stakes involved, you can count on a long drawn-out legal battle.

Net Neutrality

The term “net neutrality” was only coined recently, but the concept existed in the age of the telegraph, maybe even earlier. In 1860, a US federal law subsidizing a coast to coast telegraph line stated that “messages received from any individual, company, or corporation, or from any telegraph lines connecting with this line at either of its termini, shall be impartially transmitted in the order of their reception, excepting that the dispatches of the government shall have priority.”
– An act to facilitate communication between the Atlantic and Pacific states by electric telegraph. June 16, 1860

Network Neutrality essentially describes networks that do not favor particular network destinations or classes of applications over others. For example, a neutral network would not give better service to some web sites over others, and it would likewise not favor web-surfing or blogging over online gaming or Voice over IP. Network neutrality violations for political or moral reasons are not uncommon, for example China and Saudi Arabia both filter the internet, preventing access to certain types of websites.

Network providers often enter into peering arrangements among themselves that often stipulate how certain information flows should be treated. In addition, network providers often implement various policies such as blocking of port 25 to prevent insecure systems from serving as spam relays, or other ports commonly used by decentralized music search applications (often called “P2P” though all applications on the Internet are essentially peer-to-peer).

Large American internet content providers have claimed that network neutrality also concerns the question of network providers favoring or disfavoring certain websites (e.g. google.com) or certain brands of Voice Over IP over others. Advocates of network neutrality claim that large telecommunications providers are attempting to unfairly profit from their investment in residential networks: “[These companies] want to be Internet gatekeepers, deciding which Web sites go fast or slow and which won’t load at all”…”tax content providers to guarantee speedy delivery of their data.”…”to discriminate in favor of their own search engines, Internet phone services, and streaming video —while slowing down or blocking their competitors”…”to reserve express lanes for their own content and services.

Some broadband providers proposed to start charging content providers in return for higher levels of service. Packets originating from providers who pay the additional fees would in some fashion be given better than “neutral” handling, while those content providers who do not pay the higher fees would get a lesser level of service. Given this ability to accelerate the handling of selected packets, the service providers would perhaps give Quality of Service guarantees to given senders or recipients. This points out that once the net moves away from common carrier rules there are at least two levels of pricing: the price an ISP charges consumers for access and the price the ISP could charge Websites by varying bandwidth.

In 2004, a small North Carolina telecom company, Madison River Communications, blocked their DSL customers from using the Vonage VoIP service. Service was restored after the FCC intervened and entered into a consent decree that had Madison River pay a fine of $15,000.

Many broadband operators have imposed various contractual limits on the activities of their subscribers. In the best known examples, Cox Cable disciplined users of virtual private networks (VPNs) and AT&T, as a cable operator, warned customers that using a Wi-Fi service for home-networking constituted “theft of service” and a federal crime. Comcast blocked ports of VPNs, forcing the state of Washington, for example, to contract with telecommunications providers to ensure that its employees had access to unimpeded broadband for telecommuting applications.

Save The Internet, an advocacy organization led by media critic Free Press, has cited several situations as examples of discrimination by ISPs.

In 2005, Canadian telephone giant Telus blocked access to voices-for-change.ca, a website supporting the company’s labour union during a labor dispute, as well as over 600 other websites, for about sixteen hours.

Shaw Cable, a major Canadian internet provider, offers a “quality of service” upgrade for their VoIP service. A number of competing VoIP providers have issued complaints that Shaw may be downgrading competitor’s traffic. No evidence has been offered to support any such claim.

In April, Time Warner’s AOL blocked all emails that mentioned www.dearaol.com, an advocacy campaign opposing the company’s pay-to-send e-mail scheme. An AOL spokesman called the issue an unintentional “glitch.”

In February, 2006, some of Cox Cable’s customers were unable to access Craig’s List because of a so-called software bug in the Authentium personal firewall distributed by Cox Cable to improve customers’ security. Save the Internet said this was an intentional act on the part of Cox Cable to protect classified ad services offered by its partners. The issue was resolved by correction of the software as well as a change in the network configuration used by Craig’s List. Craig Newmark acknowledges this was not intentional.

I have personally encountered discrimination on the part of Cox Cable as they have violated net neutrality by blocking certain emails being sent through their SMTP servers. Although Cox will not disclose the criteria for blocking emails and denies the violations, I have demonstrated they do, in fact, censor a certain class of email messages sent by their customers.

Even though Cox Communications has implemented improvements in networking technology, which make providing broadband service cheaper, they still found a way of increasing their fees for broadband access by 5% in 2006. Was this perhaps a reaction to the competition for audio telecommunications over the Internet (including Voice Over IP technology) which threaten their revenues? Cox has been aggressively advertising their own VoIP service at a much higher cost than their competitors and since they have so far been banned from blocking their competitors traffic, perhaps they have found a way to charge everyone higher fees to make up the difference.

In the US Broadband services were once regulated differently according to the technology on which they were delivered. While cable Internet has always been classified by the FCC as an information service free of most regulation, DSL was once regulated as a telecommunications service. As the two types of networks have increasingly provided the same services, it has become difficult to justify different sets of rules, leading to the question of which rules should apply to both. In 2005 the FCC re-classified DSL according to the more permissive cable rules.

Proposals for network neutrality laws are generally opposed by the cable television and telephone industries, and some network engineers and free-market scholars from the conservative to libertarian. Opponents argue that (1) Network neutrality regulations severely limit the Internet’s usefulness; (2) network neutrality regulations threaten to set a precedent for even more intrusive regulation of the Internet; (3) imposing such regulation will chill investment in competitive networks (e.g., wireless broadband) and deny network providers the ability to differentiate their services; and (4) that network neutrality regulations confuse the unregulated Internet with the highly regulated telecom lines that it has shared with voice and cable customers for most of its history.

By late 2005, network neutrality regulations were included in several Congressional draft bills, as a part of ongoing proposals to reform the Telecommunications Act of 1996. They would generally require internet providers to allow consumers access to any application, content, or service. However, important exceptions allow providers to discriminate for security purposes, or to offer specialized services like “broadband video” service. These regulations generally forbid ISPs from offering different service plans to their customers.

Enhanced 911

Cell phone subscribers in nearly every state pay anywhere from 20 cents to $1.50 a month for what is described in their bills as 911 improvements. In a recent Associated Press analysis, more than $200 million collected from cell phone users for upgrades to the 911 system has been diverted in the last two years to plug state budget holes, keep campaign promises and, in at least one case, buy police uniforms. In some states, the AP analysis found, less than half that money is actually going to help emergency dispatchers keep pace with the features of smart phones.